Correlation Between Direxion Daily and WisdomTree Voya

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and WisdomTree Voya at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Direxion Daily and WisdomTree Voya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily NVDA and WisdomTree Voya Yield, you can compare the effects of market volatilities on Direxion Daily and WisdomTree Voya and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Direxion Daily with a short position of WisdomTree Voya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and WisdomTree Voya.

Diversification Opportunities for Direxion Daily and WisdomTree Voya

0.08

Correlation Coefficient

Direxion Daily  WisdomTree Voya

Significant diversification

The 3 months correlation between Direxion and WisdomTree is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and WisdomTree Voya Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Voya Yield and Direxion Daily is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Direxion Daily NVDA are associated (or correlated) with WisdomTree Voya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Voya Yield has no effect on the direction of Direxion Daily i.e., Direxion Daily and WisdomTree Voya go up and down completely randomly.

Pair Corralation between Direxion Daily and WisdomTree Voya

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 17.29 times more return on investment than WisdomTree Voya. However, Direxion Daily is 17.29 times more volatile than WisdomTree Voya Yield. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Voya Yield is currently generating about 0.04 per unit of risk. If you would invest  2,186  in Direxion Daily NVDA on October 7, 2024 and sell it today you would earn a total of  8,614  from holding Direxion Daily NVDA or generate 394.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.81%
Values	Daily Returns

Direxion Daily NVDA  vs.  WisdomTree Voya Yield

Direxion Daily NVDA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Voya Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Voya Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, WisdomTree Voya is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and WisdomTree Voya

The main advantage of trading using opposite Direxion Daily and WisdomTree Voya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, WisdomTree Voya can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WisdomTree Voya will offset losses from the drop in WisdomTree Voya's long position.

The idea behind Direxion Daily NVDA and WisdomTree Voya Yield pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.